Buy Alibaba Group Holding Ltd. (NYSE:BABA) Stock.

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Shareholders of Jack Ma-led Alibaba Group Holding Ltd. (NYSE:BABA) must be mighty pleased with the performance of their Alibaba stock investments. Alibaba stock is up by over 100% this year, outperforming the broader markets by a huge margin. Strong growth in fundamentals, accompanied by secular macro tailwinds have ensured that the stock hasn't lost momentum. The massive returns the shares have racked up could lure investors into profit booking, but is that the best way to play Alibaba stock right now? Our first trade setup for the day answers this question.

As we have noted in our recent Alibaba coverage, we are bullish on the e-commerce to cloud player over the longer term. And if the technical charts are anything to go by, Alibaba stock looks set for more upside even in the near term. In other words, it is a good time to buy shares in the Chinese e-commerce leader. The Alibaba stock technical chart recently flashed a bullish signal, implying that the recent upward momentum should continue over the next few trading sessions. So, what exactly are we looking at?

Alibaba stock recently bounced off its 20-day simple moving average (SMA), which has been a key support level for the stock over the last one year. Following the strong breakout, the Moving Average Convergence Divergence (MACD), a popular momentum indicator, has now flashed a bullish signal. The MACD line cut the signal line from below to form a bullish MACD crossover, which implies that the uptrend should continue over the next few sessions Given the longer term tailwinds Alibaba stock is riding, investors should consider buying into the stock at the current price levels, on the support of a strong technical chart.

Our second technical trade of the day focusses on Sunnyvale, California based semiconductor play, Advanced Micro Devices, Inc. (NASDAQ:AMD). AMD stock is up just 7.76% for the year and has seen extremely choppy trading activity all through the year. In early September, AMD stock failed to breakout above the resistance from its 50-day SMA at the $13.2 level. The stock has lost nearly a dollar since then and has now fallen below its 20-day and 100-day moving averages as well. With the stock trading well below the key moving averages, a breakout will be hindered by multiple resistance levels in the $12 to $13 range.

The bearish SMA crossovers were also followed by a bearish MACD crossover in the last trading session. The MACD line fell below the signal line, indicating the increasing downward pressure on the stock. To put it another way, AMD stock might still be far from the bottom, and near term misery for AMD shareholders is far from over.

Microsoft Corporation (NASDAQ:MSFT) Stock Enters The Overbought Zone

Shares of Redmond, California based Microsoft Corporation (NASDAQ:MSFT) have rallied steadily through the year. Microsoft stock price is up by over 21% year-to-date, beating the 20% rise of the Nasdaq Composite (INDEX:COMPX) in the same timeframe. The rally has taken Microsoft stock price into the overbought zone, implying that a near term pullback might well be due.

So, how do we identify overbought/oversold conditions in security prices? Well, we use the Relative Strength Indicator (RSI), a popular momentum indicator used by chartists. As per Investopedia, the RSI is a momentum indicator "that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security." Investopedia goes on to add, "Traditional interpretation and usage of the RSI is that RSI values of 70 or above indicate that a security is becoming overbought or overvalued, and therefore may be primed for a trend reversal or corrective pullback in price. On the other side of RSI values, an RSI reading of 30 or below is commonly interpreted as indicating an oversold or undervalued condition that may signal a trend change or corrective price reversal to the upside."

As the Microsoft stock technical chart shows, according to the RSI indicator, Microsoft stock entered the overbought zone during the last trading session. The bearish signal from the RSI is also supported by the Bollinger Bands indicator, which is another momentum indicator, popular among chartists. Microsoft stock price is currently flirting with the upper Bollinger band, which indicates that the likelihood of a near term pullback is high. To put it another way, don't be surprised if you see a correction in Microsoft stock price over the next few trading sessions.

If you're looking for more such technical trading ideas, check out our daily trading ideas section. If you're also looking to discover fundamentally solid tech stocks, you should check out our top stock picks from the tech sector, which have beaten the NASDAQ by over 150%. Interested in automotive stock? Then, we also have our top picks from the auto sector, which have beaten the S&P 500 by over 247%.

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